One of the most prevalent critiques of market economies is that they transform humanity into homo economicus … cold-blooded profit-calculating machines with no regard for others. Visions of Ebenezer Scrooge pop into our heads. This perception is a key tenet of today's "shop local" movement.
Nicholas Christakis and James Fowler offer an important insight that touches on homo economicus in their book, Connected: The Surprising Power of Our Social Networks and How They shape Our Lives. Maybe you've heard of the ultimatum game. There are two players. One is offered $10 to divide between the two players. But the second player can veto the division, in which case, all the money is returned.
Let's say that the first player proposes that he keep $9 while the second player gets $1. Should the second player accept the division? Accepting the offer will make him $1 richer. In case studies done across cultures, the second player will veto this transaction most of the time. A sense of injustice outweighs the economic profit. But here is where it gets interesting. What if it is 8:2 or 6:4? Studies show that people of different cultures have different tipping points.
Anthropologist Joseph Henrich wondered if the results [of the ultimatum game] would generalize to people in the nonindustrialized world, so he tried the games with the Machiguenga, and indigenous group he was studying in the Peruvian Amazon. Oddly, these people behaved much more “rationally” than their counterparts in the developed world. Those acting as the first player in the ultimatum game made lower offers, and those acting as the second player tended to accept them, a result much closer to what traditional economists had previously predicted. …
… It turned out the Machiguenga were not alone. From one society to another, there was a wide range of variation both in the initial offer and the tendency to reject unfair offers. The Ann Arborites of Michigan performed as previously observed among university students, with average offers by the first player of about 44 percent in the ultimatum game. The Hadza of Tanzania and the Quicha of Ecuador offered much less than university students, about 27 percent on average. Meanwhile, the Lamalera of Indonesia and the Ache of Paraguay offered somewhat more (58 percent and 51 percent respectively).
The anthropologists involved in the study were curious why some groups would offer more than others, so they studied several aspects of each society, including the nature and origin of the local language and the peoples’ relationship to the physical environment. Some groups lived in forests, others on the plains, and others in deserts. Some groups were hunter-gatherers, others were shepherds; still others were small-scale farmers. Some groups lived sedentary lives, staying in one place, while others were nomadic, roaming widely. Their societies varied in complexity too, with some based on families, and others based on groups of families, tribes, or villages.
But the variables that seemed to be most closely related to differences in group behavior were explicitly social. One of these variables was anonymity, a measure of how frequently each group interacted with strangers. For example, the Achuar of Ecuador hardly ever saw strangers, but the Shona of Zimbabwe encounterd them all the time. The groups also varied in how frequently they engaged in market transactions. The Hadza foragers in Tanzania were almost completely self-reliant, and they therefore had little interaction with markets; whereas groups like the Orma of Kenya frequently bought and sold livestock and also worked for wages from time to time.
The researchers found that the groups who were in greater contact with strangers were also more likely to engage in what they call prosocial behavior. That means they cooperated with others in the ultimatum game by making higher offers, but they were also willing to reject low offers. In other words, as groups expand their networks beyond the family unit, they appear to behave less and less like Homo economicus and more like Homo dictyous. The economists’ simplification of a person who would offer little or nothing to his counterparts would thus seem to apply only, if ever, to isolated individuals bereft of social interaction, a state that cannot easily be found even in the most remote parts of the globe and that has never really characterized the human condition. (226-228)
This observation sent my mind spinning in several different directions.
First, there is the Adam Smith passage about the butcher, the brewer, and the baker:
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” (Wealth of Nations, Book I, Chapter 2, paragraph 2)
This passage is frequently misrepresented as Smith saying that we should engage in transactions based on our self-interest. In fact, Smith believed benevolence to be the highest moral virtue. However, he had a belief in human depravity that would have made John Calvin proud. Benevolence was not reliable for the ongoing needs of life. We must achieve a sense of interdependence by helping our transaction partners see that it is in their ongoing interest to trade with us. Go back and read this passage in context, and it becomes clear that Smith is suggesting we appeal to the self-interest of others and not advocating that we rely purely on self-interest.
Second, writing more than 1600 years ago, John Chrysostom wrote in Homilie de perfecta caritate (see earlier post):
First we are taught love in the very manner in which we were created, for God, having created a single human being, decreed that we should all be born from it, so that we might all see ourselves as one and seek to keep the bond of love among ourselves as one and seek to keep the bond of love among ourselves. Secondly, God wisely promoted mutual love through our own trade and dealings. Notice that God filled the earth with goods, but gave each region its own peculiar products, so that, moved by need, we would communicate and share among ourselves, giving others that of which we have abundance and receiving that which we lack.
And …
He {God} likewise made us to stand in need of one another, that thus he might bring us together, because necessities above all create friendships. For no other reason neither suffered He all things to be produced in every place, that hence he might compel us to mix with one another … And accordingly that we might easily keep up intercourse with distant countries, he spread the level of the sea between us, and gave us the swiftness of the winds, thereby making our voyages easy.
Chrysostom clearly saw a link between trade and a sense of community.
Third, the studies I see from time to time show a strong link between being able to trust strangers and GDP. As one goes up, so does the other.
In general, trade not only tends to benefit people materially. In many ways, it nurtures prosocial behavior.
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